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How do most web-based companies deal with COGS in their financials & accounting?

Sheldon Reynolds's Profile

Answers

Donald Noble
Title: CFO
Company: Kelser Corp
(CFO, Kelser Corp) |

Sheldon, interesting question. I am asking the same thing for PS firms. Not an expert, but my guess is that you build a cost model for the Website (including upkeep, hosting, etc) and then allocate based on your revenue model. For example, if you charge $49 per month, You then charge to that a portion of the hosting, data creation, etc. You then have to subtract those items from the actual cost. Extending that example, if a person spends half their time on the website, then you have to put have their time into the cost model and then subtract from salaries to ensure you do not have the expense twice.

Hope that helps a little.

Don

Jeff Fisher
Title: Audit Manager
Company: Windes & MCClaughry
(Audit Manager, Windes & MCClaughry) |

From a financial reporting perspective, I would recommend google searching for web-based public company Form 10-Ks or searching for them through sec.gov. For both accounting and reporting, see ASC 985-20 Costs of Software to Be Sold, Leased, or Marketed. You could look at public companies that own some of the games played on facebook for examples.

Jeff

(Agent, JKS Solutions, Inc.) |

Well, it would depend on the industry of the web based business. Are you a retailer or a service provider or a subscription model.

The accounting for an industry is not different because it is web based.

Topic Expert
Doug Thompson
Title: Director of Revenue
Company: Castlight Health
(Director of Revenue, Castlight Health) |

It's easier if you can organize it by department. You have your direct third-party hosting and software costs, and then you have a specific department internally dedicated to maintaining the web site, perhaps another for customer support, and stick those in COGS. But yes, check out 10Ks as well.

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